Suez joins French mega-media alliance

French utility company Suez Lyonnaise des Eaux and entrepreneur and financier Bernard Arnault have formed a net alliance worth E1bn (£600m) after months of discussions.

Suez has acquired a 30 per cent stake in Arnault's internet company Europe@web for E300m (£179m) in an attempt to further its presence in the internet market. The two companies began negotiations in the summer. Suez already has stakes in content providers through its 36 per cent stake in TV channel M6 and its 25 per cent share in France's second digital satellite TV service TPS. In return, Arnault will take a10 per cent stake in the Suez/Telefonica consortium bid for a French UMTS licence. The alliance will provide Europe@web with preferential access to high-speed communication services. In a statement, the company said this provided the base for further cooperation with Suez. However, the company would not comment on future plans. Suez will compete against Vivendi's SFR, Bouygues Telecom and France Telecom's Itineris for one of the four UMTS licences due to be distributed via a beauty contest early next year. But Olivier Beauvillain, analyst at Jupiter MMX, was unimpressed by the deal. He said: "These are two troubled players clinging to each other. It is two companies that know which markets they need to be but don't know how to succeed there. Europe@web has had some recent failures with its investments and has realised that if you want to go further in internet then you need to partner with traditional media. While Suez is trying to get into telecoms and the Internet but is too late - it is more a follower than a leader." Bruno Peuch, entrepreneur and CEO of Dream Up, agreed, saying: "It makes sense for Arnault to want to get into UMTS as that is the future for mobile content. But his strategy is unclear as to how he will use the links with Suez, it could mean that after disappointments with recent investments the company is moving its internet strategy towards telecoms." For Suez it seems that it is trying to get more links with content providers. The two are flirting with each other but the strategy is not married yet."